Adventures in Legal Outsourcing to India and Beyond

September 25, 2012

Fareed Zakaria Summarizes the Case for Outsourcing

Sadly, more than a few critics will take potshots at Fareed Zakaria in particular, when it comes to the subject of outsourcing. After all, he was busted (and apologized) for outsourcing some of his writing to uncredited others. Zakaria nevertheless remains one of the world's most influential pundits in the realm of international affairs and economics. He remains the host of CNN’s flagship international affairs
program, "Fareed Zakaria GPS," Editor-at-Large for TIME magazine, columnist for The Washington Post, and a New York Times bestselling author ("The Post American World"). Also, Zakaria is beyond categorization politically. Although he endorsed President Obama in 2008, by no means does he tow the Democratic Party line. His views on outsourcing, for example, are contrary to the stated positions of both President Obama and Governor Romney, as these politicians scramble for votes from people who mistakenly believe outsourcing is an enemy. Zakaria's points, especially on how outsourcing allows businesses to thrive domestically, apply with special force to legal outsourcing, which can free not only companies but also law firms, from outmoded inefficiencies that unnecessarily increase cost and stifle growth. Thanks to legal offshoring, our own law firm continues to add supervisory and other American lawyers to meet the increased demands of happy clients, new and old, who have seen their legal costs go down, through utilization of outstanding, US-and-UK-law-trained professionals in Mysore, India. Below are excerpts from a rush transcript of Zakaria's GPS program on CNN, from last weekend (September 23, 2012):

Now for our What in the World segment. There's one issue on which Barack Obama and Mitt Romney are in agreement: outsourcing.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: "We do not need an
outsourcing pioneer in the Oval Office. We need a president who will
fight for American jobs."

MITT ROMNEY, GOP PRESIDENTIAL CANDIDATE: "If there's an
outsourcer-in-chief, it's the President of the United States not the guy
who's running to replace him."

ZAKARIA: Every week, politicians on both sides of the aisle bash
outsourcing. Each accuses the other of shipping jobs to China. But,
hang on. What is so bad about outsourcing? Let's look at the facts.
A common misconception about outsourcing is that it is a zero-sum
game. By that I mean that when an American job is moved to China, we
tend to read the score as China +1 and American -1.

But a
recent study from the London School of Economics' Center for Economic
Performance reviewed 58 American industries between 2000 and 2007. They
found that instead of limiting jobs for Americans, immigration and
off-shoring actually improved the domestic job market.

You
can understand why. If a company can lower its costs by outsourcing, it
is likely to survive and flourish and, thus, eventually hire more
workers in America.

Outsourcing is actually a fancy word
for a simple, ancient idea. People should specialize at what they do
best. Adam Smith described it as far back as 1776. He wrote in the
Wealth of Nations, "If a foreign country can supply us with a commodity
cheaper than we ourselves can make it, better buy it of them."

The concept dates even further back, perhaps right back to the first
rudimentary marketplace. Buyers always look for the best deal on the
market.

The difference today is the market is a highly
global, competitive space so for a company to survive, it needs to seek
out the best place to make its goods.

And hundreds of
millions of consumers benefit. They get cheap goods and services.
Everything from iPhones to airline tickets would be a lot more expensive
if not for outsourcing.

U.S. companies don't simply ship
jobs out to China or India because labor is cheaper there. They do so
also to gain a foothold in growing emerging markets. And, as new
economies rise, they buy more American products and services and they
invest their capital in the United States.

When the North
American Free Trade Agreement was being implemented in 1994, many
feared the deal would result in hundreds of thousands, millions of lost
American jobs.

People though cheaper Mexican labor and
goods would replace American-made products. But all those years later,
most economic studies show that NAFTA's net effect on jobs was
negligible. Instead, NAFTA helped both the Mexican and American
economies to expand.

Now, outsourcing and trade can be
misused. If corporations ship production off-shore to avoid taxes or do
it in a short-sighted way. Companies need to recognize that American
workers, high-wage workers, can produce quality goods efficiently, as
they do in Germany for example.

But the reality is that, as
a concept, outsourcing is not only useful, it is inevitable. It's
never easy to see a job move from one country to another. But jobs are
lost by automation too. Does that make progress bad?

The
answer isn't to criticize outsourcing. Instead, we need to find ways to
build on its advantages. By being negative about a pretty standard and
age-old global practice, both political parties are masking a lack of
real ideas.

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